South African Market Update South African equities ended higher for a sixth consecutive month, despite poor performance from large industrial counters including Naspers, Prosus and British American Tobacco acting as a headwind to the performance of the local equity index. Local bonds ended the month higher, supported by a stronger rand over the month and outperforming both aggregate developed and emerging market bond indices. Local listed property had a strong month, as the asset class continues its recovery amid the local economy returning to more normal levels of activity post the Covid-19 induced lockdown at the beginning of the year. The rand was largely stronger against most major developed market currencies over the month, receiving continued support from the positive trade balance caused by higher commodity prices and subdued imports. South African Economic Update Following weak economic data in January due to the Covid-19 induced restrictions, trade data for February (which was released in April) rebounded strongly. Wholesale and retail trade recorded month on month increases of 1.3% and 6.9%, after falling -0.9% and -2.4% respectively in January. SA’s trade surplus widened to R52.8 billion in March (from R31.2 billion in February), which is the widest surplus on record and continues to provide significant support to the rand, one of the best performing emerging market currencies year to date. SA headline CPI moved higher to a year-on-year figure of 3.2% for March (from 2.9% in February). Local inflation continues to surprise on the downside, however, inflation is expected to rise further over the next few months, largely due to base effects and higher international prices. Global Market and Economic Update Global equity markets continued to climb higher in April, supported by surprises in terms of positive economic data and company earnings releases. As at the end of April, 87% of S&P 500 companies have posted Q1 2021 earnings which beat estimates, with earnings growing by an average of over 46% year on year. US President Joe Biden addressed a joint session of Congress during the month, motivating for a $2 trillion infrastructure plan and a newly unveiled $1.8 trillion plan for families, children, and students. President Biden is proposing that the American Families Plan is largely funded by additional tax of $1.5 trillion on the top 1% of earners as well as increased levies on capital gains and ordinary income for those earning more than $400,000 a year. The US is expected to reach its pre pandemic level of output midway through 2021, with record stimulus packages and low interest rates providing significant support to aid economic recovery. The positive moves in global equity markets came despite uneven Covid-19 vaccine distribution across developed and emerging markets, with many key emerging markets struggling to source and distribute vaccines, leading to spiking infection rates in certain countries (particularly India and Brazil). Source: Morningstar
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